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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE SECOND RURAL AND MAIN ROADS PROJECT Sustainable Development Department Central America Latin America and the Caribbean Region IBRD LOAN MAY 6, 2003 TO GUATEMALA JUNE 22, 2011 Report No: GT This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
2 ABBREVIATIONS AND ACRONYMS ADIMAM BP DGC HUISTA IBRD INFOM MAMSOHUE OP PAD Asociación de Desarrollo Integral de Municipalidades del Altiplano Marquense (Association of Municipalities of the Highlands of San Marcos) Bank Procedure Dirección General de Caminos (Roads General Directorate) Mancomunidad of the Huista Region (Association of Municipalities of the South West of Huehuetenango) International Bank for Reconstruction and Development Instituto de Fomento Municipal (Municipal Development Institute) Mancomunidad del Sur Occidente de Huehuetenango (Association of Municipalities of the South West of Huehuetenango) Operational Policy Project Appraisal Document Regional Vice President: Pamela Cox Country Director: Sector Director: Felipe Jaramillo Laura Tuck Sector Manager: Aurelio Menendez Task Team Leader: Stephen Jeremy Brushett
3 GUATEMALA SECOND RURAL AND MAIN ROADS PROJECT RESTRUCTURING PAPER P CONTENTS Page A. SUMMARY... 1 B. PROJECT STATUS... 1 C. PROPOSED CHANGES... 2 D. APPRAISAL SUMMARY... 3
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5 Restructuring Restructuring Type: Level One Last modified on date : 06/22/2011 Status: Submitted to SECPO 1. Basic Information Project ID & Name Country Task Team Leader Sector Manager/Director Country Director Original Board Approval Date 05/06/2003 Original Closing Date: 12/31/2007 Current Closing Date 06/30/2011 Proposed Closing Date [if applicable] 12/31/2011 EA Category Revised EA Category EA Completion Date 11/15/2002 Revised EA Completion Date n/a P055085: GT SECOND RURAL AND MAIN ROADS PROJ. Guatemala Stephen Jeremy Brushett Aurelio Menendez Carlos Felipe Jaramillo B Partial Assessment n/a 2. Revised Financing Plan (US$m) Source Original Revised BORR IBRD Total Borrower Organization Department Location 4. Implementing Agency Organization Department Location Instituto de Fomento Municipal Guatemala (INFOM) Direccion General de Caminos - Guatemala DGC i
6 5. Disbursement Estimates (US$m) Actual amount disbursed as of 06/20/ Fiscal Year Annual Cumulative Total Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured project trigger any new safeguard policies? If yes, please select from the checklist below and update ISDS accordingly before submitting the package. Y Safeguard Policy Last Rating Proposed Environmental Assessment (OD 4.01) X Natural Habitats (OP 4.04) Forestry (OP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP 4.11) X Indigenous Peoples (OD 4.20) X Involuntary Resettlement (OP 4.12) X Safety of Dams (OP 4.37) Projects in International Waters (OP 7.50) Projects in Disputed Areas (OP 7.60) 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The overarching goal of the project is to reduce rural poverty and build social cohesion by improving and maintaining access in rural areas to markets, schools, health centers and other social and economic infrastructure through broadened community participation. By emphasizing beneficiary involvement, the project will assure that local development decisions reflect the needs and priorities of rural communities. 7b. Revised Project Development Objectives/Outcomes [if applicable] ii
7 A. SUMMARY GUATEMALA SECOND RURAL AND MAIN ROADS PROJECT RESTRUCTURING PAPER 1. The proposed restructuring is to trigger the Involuntary Resettlement policy (OP/BP 4.12) in view of the fact that resettlement has taken place under the Project. B. PROJECT STATUS 2. The IBRD Loan in the amount of US$46.7 million was approved by the Board May 6, 2003, and became effective on November 3, There have been four restructurings of the loan agreement to date: the first, on July 26, 2006, to accommodate a modification to the project description and a reallocation of loan proceeds; 1 the second, on March 23, 2010, to raise the financing percentage of the loan for rural road works given financial constraints in the beneficiary municipalities; the third, on June 28, 2010, to allocate the contingencies in the loan to the categories for rural and secondary road works; and a fourth on November 10, 2010 to accommodate a further reallocation of loan proceeds. 3. There have been three closing date extensions: two to accommodate the revised implementation schedule for the project: from December 31, 2007, to June 30, 2009 (agreed on November 27, 2007), and from June 30, 2009, to June 30, 2011 (agreed on June 29, 2009); and a third from June 30, 2011, to December 31, 2011 (agreed on June 24, 2011), to give further time for the Borrower to complete resettlement actions as described below. At the time of the second extension, the estimates of final project cost were revised, with an expectation that a counterpart contribution of about US$29 million, as opposed to US$17 million originally estimated, would be required to complete the project. 4. The project s development objective is to reduce rural poverty and build social cohesion by improving and maintaining access in rural areas to markets, schools, health centers and other social and economic infrastructure through broadened community participation. By emphasizing beneficiary involvement, the project will assure that the local development decisions reflect the needs and priorities of rural communities. This development objective is expected to be substantially realized by the time of the revised closing date of end December The institutional and broader social benefits of the project are expected to be realized in view of the substantial participation of the beneficiary population at all stages of the project. Due to increases in unit costs and to the changes in the project description, planned physical access improvements will be less than originally estimated and some may not be realized earlier than mid To allow the loan to help finance some of the costs of Hurricane Stan related road infrastructure damage. 2 There will be 640 km of rural roads improvements rather than 830 km, and 145 km of secondary/departmental road improvements rather than 207 km. 1
8 5. It is expected that the proceeds of the loan will be about 95% disbursed by the revised closing date, taking into account the funds needed to complete not later than December 2011 currently ongoing activities supervised by the Instituto de Fomento Municipal (INFOM) and partly financed by the loan proceeds. 3 In regard to works supervised by the Direccion General de Caminos (DGC), since 2011 the Government has the full responsibility to provide the resources for the completion of the outstanding works at an estimated cost now set at $35 million not earlier than mid The major remaining implementation issue concerns the completion of the resettlement and compensation of households and landholders affected by works in a number of the secondary road improvement sub-projects, notably in Huehuetenango department. C. PROPOSED CHANGES Safeguards 6. The proposed restructuring is to trigger the Involuntary Resettlement policy (OP/BP 4.12) in view of the fact that resettlement has taken place under the Project. 7. The project is being carried out in the departments of San Marcos (ADIMAM mancomunidad) and Huehutenango (HUISTA and MAMSOHUE mancomunidades). The Project is implemented by two executing agencies: the INFOM working with the local municipal authorities organized into mancomunidades for the improvement of rural roads and strengthening of institutional capacity at local level; and the DGC, which retains responsibility for the management, rehabilitation, and maintenance of the main and secondary road network of the country. 8. At the time of project appraisal, involuntary resettlement was not expected, given that none of the road sub-projects involved significant changes in width or alignment. Careful consideration was afforded to the socio-cultural dimensions of the project in that a Social Management Plan, under the management of INFOM, was put in place to maximize the positive impacts of the project and to mitigate any adverse effects. The Loan Agreement provided that, prior to carrying out any sub-project, a Resettlement Action Plan should be prepared and implemented by the Borrower (through DGC) and by INFOM, in the event of any displacement of persons taking place according to the principles and guidelines set forth in the Resettlement Policy Framework document included in the Loan Agreement. 9. Secondary road improvement works contracts in San Marcos and Huehuetenango departments were let in mid 2008 with contractor mobilization towards the end of The works experienced slow initial progress in During the November and December 2009 supervision missions, the occurrence of significant displacement of households was confirmed in three sections of the secondary road improvements being carried out by DGC in Huehuetenango (Santa Barbara, La Libertad and Tohon - Santiago Chimaltenango). This situation was a result of a combination of: (1) design changes; (2) widening of some sections, which required excavations and side cuts of rock or slope; and (3) construction of new houses very close to the existing road and, in some cases, 3 The current amount disbursed is US$42.0 million. 2
9 encroaching on the existing road since designs were finalized. At the Bank s request, the Government subsequently agreed to document all cases of displacement in the Huehuetenango and San Marcos departments as well as the actions taken or to be taken to address the issue. 10. Through DGC and the supervising consultants, the Government has subsequently identified 82 cases where dwellings and other structures have been or will be affected to accommodate the final alignment of the secondary road improvements in Huehuetenango and San Marcos. Of the 82 cases, 56 involve the total or partial loss of dwellings. In the remaining 26 cases, other structures were affected, such as fences, entrances and water structures. Compensation has been or is being provided in the form of reconstruction of dwellings and other structures at equivalent or better standards. In most cases (38) the reconstruction of dwellings is taking place on residual land of the affected properties; in 18 cases it is taking place on land located in close proximity to the affected property. 11. In addition, DGC and the supervising consultants have documented 157 cases where agricultural or residential land under cultivation has had to be taken to permit road construction, but no dwellings or other buildings were affected. In all of these cases, land was taken on the basis of agreements with the affected landowners. In 87 cases, the local municipalities provided cash or in kind compensation for the loss of land and/or crops or trees. In 63 cases, the landowners agreed to allow the construction contractors to dump excavated soil on their land in exchange for improvements that they requested on other parts of their properties. A common practice was to use excavated soil to fill and grade uneven sections of the properties affected. In the 7 remaining cases there is no evidence of the compensation provided, if any. 12. DGC has agreed to implement a Corrective (Resettlement) Action Plan, dated April 26, The Plan will (i) address documentation and non-compliance issues identified in past resettlement cases, including the cases for which there is no evidence of any compensation to date; (ii) ensure policy compliance in cases where an agreement with displaced persons has not yet been reached; (iii) establish a grievance redress mechanism; and (iv) implement a communications strategy to keep the communities well informed about the progress in the reconstruction of affected houses and of the civil works. In general, the goal of the CAP is to ensure that all cases of displacement on account of project-supported works are duly addressed. The grievance redress mechanism is expected to capture any cases that may have been missed by Government efforts to document resettlement that has taken place in the past. 13. The Loan Agreement is amended in order to include the Government s commitment to carry out the CAP. D. APPRAISAL SUMMARY 14. The following changes arise as a result of the project restructuring. 3
10 Summary Project Analysis - Social Safeguard Policies 15. At the time of appraisal, resettlement was not anticipated and, therefore, OP 4.12 was not triggered. The Project Appraisal Document (PAD - No dated April 10, 2003) refers to possible damage to private properties during works construction, but only refers to the Social Management Plan as containing the mitigating measures to address such circumstances, even though the Loan Agreement provided for a Resettlement Policy Framework. 16. In the course of project implementation, however, significant displacement took place as a result of design changes, widening of some sections, and construction of new houses too close to the road. Sustainability and Risks Critical Risks 17. The critical risks of the project include: Involuntary resettlement takes place due to unplanned changes in road design, widening of sections of the existing roads, and construction of new houses too close to the road. Risk mitigation measures are: Impacts on road construction of houses and agricultural activities are carefully assessed and resettlement plans are prepared and carried out where needed, based on the principles and guidelines set out in the Resettlement Policy Framework. 4
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